UPDATE 2-Goldman exec sees 10-pct ‘Volcker rule’ impact

* Goldman exec says Obama plan to impact bank net revs

* Dodd hits financial firms over “army of lobbyists”

* Says Wall St reform resistance “borders on insulting”
(Recasts with Corrigan, Zubrow, Reed comments)

By Kevin Drawbaugh

WASHINGTON, Feb 4 (BestGrowthStock) – The Obama administration’s
proposed “Volcker rule” could impact about 10 percent of
Goldman Sachs (GS.N: ) net revenues, a senior executive of the
Wall Street giant told a U.S. Senate committee on Thursday.

His remarks came in the second of two hearings this week by
the Senate Banking Committee on Obama administration proposals
made last month to limit risk-taking by major banks in the wake
of the financial crisis.

Gerald Corrigan, a Goldman managing director, told the
hearing about the potential impact of the proposals to curb
proprietary trading by banks and get them out of hedge fund and
private equity businesses.

“If you took net revenues associated with … proprietary
trading and hedge fund and private equity funds, we are in net
revenues talking about something over the cycle in the broad
order of magnitude of 10 percent,” Corrigan told the hearing.

The White House has shifted to a more aggressive stance on
Wall Street since the Democrats lost a Senate seat in a special
election in Massachusetts in January.

The election highlighted voter resentment against big banks
and big bonuses in the wake of massive bailouts during the
financial crisis.

At the outset of the hearing, Democratic committee Chairman
Christopher Dodd blasted banks and Wall Street for a refusal to
work with Congress on a range of proposed financial reforms
that “borders on insulting to the American people.”

Criticizing firms for hiring “an army of lobbyists” to
fight reforms, Dodd said Obama’s new proposals were on the
right track, but “will be no easy feat” to implement.

Corrigan, a former president of the U.S. Federal Reserve
Bank of New York, and JPMorgan Chase (JPM.N: ) Chief Risk Officer
Barry Zubrow both expressed support for some of the financial
regulatory reforms being considered by Congress since 2008,
when taxpayers bailed out both firms and many others.

The two bank executives backed creation of a “systemic
regulator” to monitor the economic big picture, and find a way
for the government to dismantle large, troubled financial firms
in an orderly fashion. Both proposals have wide political
support.

Corrigan said more global cooperation is needed on
accounting, bank supervision and economic policies.

He stressed the importance of mark-to-market accounting, or
pricing assets at market value, and said tightening the Federal
Reserve’s emergency lending authority would reduce the
“probability of future financial crises.”

Corrigan is a member of the Group of Thirty, an
organization of bankers and regulators chaired by Paul Volcker,
the former Fed chairman who is now an Obama economic adviser.
Volcker inspired the proposals made last month.

The proprietary trading and hedge fund limits included in
the proposals have become known as the ‘Volcker rule.’

John Reed, a former top executive at Citigroup Inc (C.N: ),
also testified on Thursday and expressed support for Volcker’s
approach. “I tend to favor Mr. Volcker’s thought on regulating
some of these kinds of activities,” Reed said.

He also called for stronger capital and liquidity
standards, more exchange-trading of financial products and a
“compartmentalized” financial industry.

Reed also advocated establishing a regulator for consumer
finance, saying, “There is a good reason to create a Consumer
Protection Agency with a clear and separate mandate.”

Creation of an agency to shield Americans from abusive
mortgages, credit cards and other financial products is one of
the Obama administration’s most controversial proposals for
tighter financial oversight.

Stock Research

(Editing by Andrew Hay)

UPDATE 2-Goldman exec sees 10-pct ‘Volcker rule’ impact